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Monday, December 14, 2009

Gambling and Taxes

House democrats announced a plan to raise personal income tax rates up to 5.4 percent on incomes over $350,000. The Obama Administration is supporting a similar plan. The additional tax revenue will be used to pay for health care proposals that extend coverage to 37 million people who are currently without coverage.

In a recent article about the proposal in the Washington Post [Health-Care Plan Would Add Surtax On Wealthy, July 15] there were several objections quoted. One objection caught my eye. It was from Senator Ben Nelson of Nebraska.

He said, "Tax is a four-letter word" with voters. Even families not ranking in the top 1 percent of earners hope they're going to be there someday. So they don't necessarily think it's fair."

He used percent to define the rich, which is significant because America is a democracy. Remember in a democracy 50 percent plus one win elections. Therefore, if Senator Nelson is right then the other 99 percent of American voters, not ranking in the top 1 percent, accept having low taxes for the wealthy because it gives them hope they might become wealthy. The 99 percent would include voters from the 37 million without health care; unless someone thinks the richest 1 percent go without health care.

Notice the word “hope” in his statement. Hope is a word often associated with gambling rather than tax policy, or fairness, or anything else. Americans and politicians talk about what is fair and what is unfair, but when it’s time to vote no one has to consider what is fair. They can vote for any reason they want including the hope they will win a state lottery and pay low taxes on their winnings.

There was a time when the wealthy paid 90 percent of their incremental income as income tax. That was back nearly 50 years ago, but it was also a time when state lotteries and gambling was mostly illegal.

For the millions who lived on a wage 50 years ago, there was little hope of becoming wealthy without years of saving, if saving was possible. Gambling mostly took place in black markets and went untaxed.

For the millions who live on a wage today, there is little hope of becoming wealthy without years of saving, if saving is possible, but the gradual rise of gambling overlaps the decline of the top income tax rate, which dropped to 35 percent back in 2003.

I read the media stories about lobbyists and the influence of money in politics, but the vote has not been abolished in the United States. The richest one percent of Americans cannot have low taxes in a democracy without the acceptance or support of millions.

Senator Nelson’s statement adds anecdotal confirmation to what I have long suspected: gambling has more influence on America’s tax policy than any of us want to admit. Gambling gives hope to the many, but low taxes to the rich. Just ask Senator Nelson.